A new report from Goldman Sachs Research examines trends in cloud computing and GenAI spending.
Spending on generative artificial intelligence, or GenAI, and cloud computing have fueled the markets in recent years, and it is likely to continue at near the same pace over the next six years, according to a new report from Goldman Sachs Research.
Spending on cloud computing should reach $2 trillion by 2030, which is up from about $496 billion at the end of 2023 and more than an expected $600 billion by the end of 2024.
Of that amount, according to Kash Rangan, head of US software research at Goldman Sachs Research, about 10% to 15% will be spent on GenAI — or roughly $200 billion to $300 billion.
GenAI spending to broaden out beyond chip makers
Rangan and his team anticipate cloud computing sales to increase at an annual rate of 22% per year, which would be slightly below the compound annual growth rate of 26% from 2019-2023. The continued robust growth is based on the idea that only 30% of workloads have moved to the cloud, Rangan said.
However, the GenAI portion of cloud sales is anticipated to grow at a faster clip. The market for GenAI is projected to hit $36 billion by the end of 2024. If the GenAI market grows to $200 billion to $300 billion, as Goldman Sachs estimates, the compound annual growth rate for GenAI would be 33% to 42% from 2025 through 2030.
Goldman Sachs researchers said the growth in GenAI will broaden out beyond infrastructure companies, like semiconductor chip makers. The next phase of growth will be with platform providers and software companies that create generative AI applications.
“The infrastructure layer is poised to be the initial beneficiary, as we are already observing with the AI revenue ramp from the hyperscalers,” Rangan wrote. “This should be followed by the platform and application layers, respectively. An inherent tethering exists between PaaS and SaaS — where PaaS solutions are needed to support the emergence of a killer application but the value in the platform layer can’t compound until more compelling applications emerge.”
For example, Rangan forecasts that software as a service (SaaS) will make up $780 billion of the cloud computing market by 2030, or 41%, while platform as a service (PaaS) is anticipated to account for $600 billion, or 30%. Infrastructure as a service (IaaS) will make up about $580 billion of the market by 2030, or roughly 29%.
Lower interest rates should boost IT budgets
Goldman Sachs Research recently polled IT buyers and found that 9% of their budgets, on average, will be allocated to GenAI over the next three years, up from a previous poll that cited 7%.
The uptick, particularly within the software sector, will be driven by several factors, including lower interest rates. With rates likely to have peaked, they should start to steadily come down, starting in September. Also, more certainty about economic policies should drive spending higher after the elections in November.
“There is a much greater probability that the generative AI opportunity is indeed real, and that software applications and platform companies are able to re-invent and therefore re-accelerate growth — especially as interest rates start to come down,” Rangan wrote. “With or without generative AI, software platforms and applications companies are in a very good position to deliver attractive returns for investors over the next several years.”
